FDI cap in asset reconstruction companies raised to 74% from 49% with a rider

MUMBAI: RBI has increased the ceiling for FDI in asset reconstruction companies (ARCs) from 49% to 74% subject to the condition that no sponsor may hold more than 50% of the shareholding in an ARC either by way of FDI or by routing through an foreign institutional investor (FII).

The foreign investment limit of 74% in ARC will be a combined limit of FDI and FII. Hence, the prohibition on investment by FII in ARCs will be removed.

The total shareholding of an individual FII shall not exceed 10% of the total paid-up capital, an RBI release said. The limit of FII investment in securities receipts may be enhanced from 49% to 74% of the paid-up value of each tranche of scheme of security receipts issued by the asset reconstruction companies, the release said.

Further, the individual limit of 10% for investment of a single FII in each tranche of SRs issued by ARCs may be dispensed with.